As the CBO notes, Fannie and Freddie “purchase mortgages at above-market prices,” driving down interest rates and passing some of the savings to home buyers. That subsidy is felt right away, but the risks in providing it are stored up over time, and their real costs may not be felt for years or even decades\u201d\u201das was the case in the years leading up to their spectacular collapse in 2008.<\/p>\n
Yet this is precisely the fiction that the Obama Administration seeks to preserve by keeping the cost of Fan and Fred off the government’s books. The Administration’s budget accounting assumes Fannie and Freddie are private companies. So under its preferred treatment, the only recognized cost to taxpayers is the money that is being pumped in to keep them afloat\u201d\u201d$110 billion so far.<\/p>\n
That’s plenty as it is, but in the wake of their government takeover, there is no justification for pretending that their risks aren’t taxpayer risks. This is all the more true with the likes of New York Senator Chuck Schumer giving the companies marching orders to rescue tenants in the Stuyvesant Town development in Manhattan.<\/p>\n